Assessing Sales Loss from Automobile Recalls through Event Study: A Toyota Case Study

Abstract

A major recall is defined as the recall in which the affected number of cars is more than certain threshold level per recall. It has a negative impact on sales, since there are fewer customers inclined to purchase an automobile from a manufacturer that is producing a defective product. This paper introduces the application of event study, used extensively in the area of financial research, to the automobile industry in order to evaluate the sales loss from a major recall. A case study of Toyota Motor Corporation is presented to demonstrate the use of the model. The model suggests that the sales may decline for the subsequent five months from the time a major recall is announced. In future, the assumption of statistical independence between recalls will be removed, and further research will be conducted to determine if this will affect the outcome of the analysis. [ABSTRACT FROM AUTHOR] Copyright of Communications of the IIMA is the property of International Information Management Association (IIMA), Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)